WRAPUP 2-Canada's once-hot housing sector cooling further

* New home prices rise in June but below expectations

* Housing starts fall in July, third straight monthly fall

* Housing has been "lost" as a driver of growth-analyst (Adds details)

By Ka Yan Ng

OTTAWA, Aug 10 (Reuters) - Canadian housing starts fell in July for a third straight month and new home prices rose less than expected in June, further evidence that the housing boom that helped drive the country's recovery from recession is starting to stall.

The reports released on Tuesday are in line with other recent data that has shown higher interest rates, a new blended sales tax in Ontario and British Columbia, and stricter lending rules are weighing on the housing sector.

Housing starts fell 1.6 percent in July to a seasonally adjusted annualized rate of 189,200 from a revised 192,300 in June, Canada Mortgage and Housing Corp (CMHC) said. Analysts had forecast 186,500 starts in July. June starts were originally reported at 189,300.

The Canadian dollar weakened against its U.S. counterpart after the data. [CAD/]

"This report confirms that housing has been lost as a driver of growth in the Canadian economy," Scotia Capital economists Derek Holt and Gorica Djeric said in a commentary.

"There are no (Bank of Canada) implications stemming from this report in our view. The BoC expected housing to cool, and it is being replaced as a growth driver by business investment in machinery and equipment."

Canada's central bank, along with most economists, had forecast residential investment would weaken markedly for the balance of the year. But though the Canadian housing sector is cooling, it still compares favorably with the U.S. housing sector, which has been unable to help spark the economy.

The CMHC report said a decrease in starts on single-family homes in both urban and rural areas in July more than offset a 13.4 percent jump in the volatile multi-unit group in urban areas.

Elsewhere in the housing market, existing home sales fell 13.3 percent in the second quarter from near-record levels in the first three months of the year, according to recent data from the Canadian Real Estate Association. Last month the association said it expects lower sales of existing homes in 2010 after previously forecasting a rise. [ID:nN30166747]

Tuesday's housing data follows other recent soft economic figures. The employment report for July last week showed the finance, insurance, real estate and leasing sectors of the economy dropped nearly 30,000 jobs. [ID:nN06197942]

"What we see fitting together is slowing activity in the new build sector corresponding with declining activity in the existing home sales sector, which invariably seems to be resonating in job losses in the financial services sector," said Stewart Hall, economist at HSBC Securities Canada.

SLOWER RISE IN NEW HOME PRICES

New home prices climbed 0.1 percent in June, following identical increases of 0.3 percent in the previous three months, Statistics Canada data showed. [ID:nN10131751]

Analysts had expected a 0.2 percent rise in the month, according to a Reuters survey. Prices, which do not include taxes, rose on a monthly basis in nine of the 21 cities surveyed. They were flat in five and declined in seven.

The top contributors to the monthly increase were Toronto-Oshawa with a 0.3 percent rise, and a 0.5 percent gain in Ottawa-Gatineau. The largest decrease was recorded in Regina, Saskatchewan, down 0.4 percent.

A separate Global Real Estate Trends report released by Scotia Economics showed Canada's resale home market outperforming new housing. It said price increases for existing homes more than doubled from 2000 to the first half of 2010. By comparison, the average cost of a new home increased by just over 50 percent. SM1C (Editing by Jeffrey Hodgson and Peter Galloway)